New Income Tax Act 2026: A big tax change is coming from April 1, 2026. The law that starts on that date is the Income-tax Act, 2025, not a separate “New Income Tax Act, 2026.” The CBDT has already notified the Income-tax Rules 2026, and those rules will start from April 1, 2026, along with the new Act. The new regime will still stay the default tax option for individual taxpayers. People who do not have business income can still choose the old regime while filing returns, and if they are eligible, they can move between the two from year to year.
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This change is important because the new regime gives lower tax rates, but it does not let people use many of the tax breaks that salaried workers used earlier. So from the new financial year, many employees will have to check carefully which tax system works better for them. The overall tax slab structure was revised in Budget 2025-26, and the government said there is no tax payable up to ₹12 lakh under the new regime, while salaried taxpayers can go up to ₹12.75 lakh because of the ₹75,000 standard deduction.
CA (Dr.) Suresh Surana said “The new Income-tax Act, 2025 (ITA 2025), effective April 1, 2026, reinforces the new tax regime by offering concessional tax rates with restriction on claiming specified deductions and exemptions. While an individual taxpayer opting for old tax regime can claim all available deductions and exemptions, a taxpayer opting for the New Tax Regime u/s 115BAC (corresponding sec. 202 under ITA 2025) cannot claim them all.”
What People will Lose?
For many salaried taxpayers, the biggest issue is this: the new regime is simpler, but it takes away many common tax benefits. Under the new regime, claims like HRA and LTA are generally not available. The Income Tax Department’s own FAQs for the new regime say HRA is not allowed there, and most Chapter VI-A deductions also cannot be claimed.
These include:
- Leave Travel Allowance (LTA)
- House Rent Allowance (HRA)
- Most special allowances related to job expenses
- Interest deduction on self-occupied house property
- Entertainment allowance
- Professional tax deduction
- Exemptions on income of minor child
- Tax holidays for SEZ units
- Additional depreciation and business-linked incentives
That means popular savings and spending deductions linked to Section 80C type investments such as PPF, ELSS, life insurance, and tuition fees do not help if a person stays in the new regime. Interest on borrowed money for a self-occupied house also cannot be claimed there.
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This means many people who used to lower their tax through rent allowance, home loan interest, insurance payments, or investment plans may not get that benefit if they stay with the default new system. The same broad idea also applies to some loss adjustments.
What Deductions Stay?
Even after all these limits, the new regime does not remove every deduction. Salaried people can still get the standard deduction, and that is now ₹75,000 under the revised structure announced in Budget 2025-26. The new regime also still allows some specific deductions like:
- Employer contribution to NPS
- Deduction under the Agnipath scheme.
- Deduction for additional employee cost in some cases.
- Deductions such as those under 80CCD(2), 80CCH, and 80JJAA continue to remain available.
So the new system may still suit people who do not use many exemptions anyway. Someone with a simple salary, no home loan, and not much tax-saving investment may find the new regime easier and sometimes better.
